Digital Identity, Reputation Capital, and Labour Market Signalling
Thirty years ago, a worker could often land a job with a firm handshake, charm, and a typed resume. Today, employers want to be able to scour applicants’ digital presence to verify credentials and experience, check for temperament and compatibility with institutional norms, and search for any potential conflicts of interest or improper behavior that could result in public relations headaches. While employers’ Internet searches of applicants may be considered excessive by some, keep in mind that customers and clients can do those same searches. Companies found to be employing men or women with sordid online pasts can be hit with negative reviews…or worse.
Importance of Digital Identity in Today’s Labor Market
In the 1990s, most white collar workers had paper resumes that might list the contact information for a reference or two. Today, thanks to the Internet and online job application portals, employers can demand multiple references, each with multiple methods of contact. Job applications can be much more thorough than when everything was limited to paper. Many employers even want to screen applicants’ social media profiles to search for disqualifying behavior or affiliations.
The Internet is Forever
For better or worse, workers need to know that the Internet is forever and one’s digital identity spans back to social media posts made during teenage years. Indeed, many school districts have begun providing Internet and social media training lessons to secondary students to explain the pitfalls of unwary computer use. Young people, who will soon enter the labor market, must realize that information they put on the Internet usually stays there forever. Newer posts may cover it up, but determined searchers and scrollers can go back years.
AI Can Deepsearch Old Content
Five years ago, workers were likely relatively safe if their unsavory or inappropriate Internet content was old and well-covered by newer, uncontroversial posts. Employers were busy and did not have time to deeply scrutinize every applicants’ total social media history. Today, however, AI can do the boring and time-consuming labor of scrolling through old posts in a tiny fraction of the time of a human HR employee. An HR rep might take an entire day to scroll back to an applicant’s high school Facebook postings, but AI can reach it in minutes.
Economics of Reputation Capital
For public-facing jobs, where an employee works directly with clients or customers, reputational capital can be very important. People want to know that the professional to whom they are entrusting money and/or sensitive information is a high-caliber, trustworthy individual. Therefore, a public-facing employee’s reputation has value and can be considered a capital resource. Just like choosing among employing traditional factors of production in different ratios to create output, firms can choose to invest money in labor that has differing amounts of reputational capital.
An analogy would be the hiring of professional athletes or entertainers. Sports teams, television studios, and record labels look at reputation as well as past revenue generation. A clean-cut, wholesome athlete or entertainer is likely worth more because he or she can more readily make public-friendly appearances that boost the employer’s reputation. For example, a pro athlete who is trusted to talk to elementary school children can create a public relations boon for his team through positive media coverage. A pop star who is trusted to appear on a children’s television show also creates a positive media buzz and may broaden her appeal with parents, leading to more music downloads (and revenue).
Reputational Capital Investment for Firms
Because reputational capital can be revenue-generating by attracting new customers or clients to a firm, it enhances demand for applicants who possess desired online characteristics. The time and resources invested in exploring applicants’ digital identities can result in selecting higher-quality applicants and rejecting lower-quality applicants. In the long run, this investment can pay off by hiring and maintaining a labor force of public-facing workers who are seen as more competent and trustworthy than average by customers. Firms considered to be staffed by high-quality professionals can charge higher prices and maintain customer loyalty, resulting in increased profitability.
Reputational Capital Investment for Workers
Based on the marginal productivity theory of wages, workers who generate more revenue receive higher wages. This means that workers who are assumed to attract more customers or clients, or increase the loyalty of current ones, will often be offered higher wages. Young professionals may therefore be justified in investing substantially in creating thorough, positive, and industry-tailored digital identities. This can include well-crafted social media pages, deliberate sourcing of references that can be included on job-related social media like LinkedIn, and a trove of high-quality photos in business clothing. Instead of social media solely for entertainment, upcoming or recent college grads may conspicuously post content that highlights their academic or professional accomplishments.
This conspicuous posting of flattering content meant to highlight one’s skills and accomplishments is known as signaling theory. Because employers and clients lack all the information about a worker, they must rely on signals to make estimations and judgments about quality and competency. Everyone relies on these signals in commerce, with sellers using various marketing strategies to send signals of quality to prospective customers. In the labor market, workers are trying to sell their labor to higher-paying firms by signaling competence and professionalism through conspicuous and well-tailored digital identities.
Reduced Information Asymmetry
There are many controversies when it comes to workers forging digital identities to signal professionalism, typically due to the advantages enjoyed by wealthy young workers as opposed to low-income rivals. Young professionals from wealthy families have ample resources to craft impeccable digital identities highlighting their professionalism, perhaps with puffery or outright fraud included. However, this generalized advantage has always, and likely will always, occur; the wealthy have more resources with which to process any sorting mechanism. Lower-income professionals can still craft high-quality digital identities that signal strong skills and professionalism in the labor market, but must be more strategic and disciplined about it.
Digital identities cover years, reducing information asymmetry that plagued hiring in the pre-Internet era. Employers can quickly check references, credentials, educational backgrounds, and previous places of employment online. Therefore, trying to create a fake digital identity is often useless; an hour of Google searches by HR can unravel it. If AI is involved in examining an applicant’s digital identity, a ruse would almost certainly be uncovered much sooner. Therefore, employers have an incentive to be demanding when it comes to applicants’ digital identities: fraudsters are unlikely to waste the time creating identities that will quickly unravel.
